The Michigan Public School Employees Retirement System, Lansing, may add as many as 17,000 participants to its new hybrid defined benefit/defined contribution plan by the end of the year.
Pension reform legislation passed in May places all MPSERS employees hired after July 1 in the new plan, which combines the “best practices” of defined benefit and defined contribution plans, said Philip Stoddard, director of the Michigan Office of Retirement Services.
The defined benefit plan portion follows traditional practices. Investment of the new MPSERS defined benefit component will mirror that of the combined defined benefit plans of the Michigan Retirement Systems, which totaled $45 billion as of June 30, with $35 billion from MPSERS.
The pension calculation of the defined benefit part of the new plan multiples the five-year final average compensation by 1.5% by years of credited service for employees at least 60 years old with a minimum of 10 years of service.
The defined contribution component offers automatic enrollment with a 2% employee contribution and an employer match of 50%, up to a maximum of 1% of an employee's salary. Third-party administrator ING Financial Services provides 18 investment options from external money managers.
“We expect that many of the 17,000 people who took advantage of an early retirement incentive plan will be replaced, which means we should have a hybrid plan with fairly significant assets by the end of the year,” Mr. Stoddard said in an interview from ORS' Lansing office. Mr. Stoddard said assets in the 2-month-old plan thus far are minimal.